How to record money "temporarily loaned" to a club or business

[Michael Hendry]

> On 24 Jul 2015, at 10:40, L. D. James <ljames at apollo3.com> wrote:
> 
> On 07/24/2015 02:07 AM, Michael Hendry wrote:
>> On 24 Jul 2015, at 00:12, L. D. James <ljames at apollo3.com> wrote:
>>> I have occasions at times when someone in an organization will pay for products or services so that the products can immediately be delivered.  However, they would like for the invoice to remain open until the company pays.  Then when the company pays, they will be giving back the money they put in to have the goods delivered.
>>> 
>>> I can imagine it might be similar to a sole proprietor loaning money to his business and paying an invoice, and when the money comes into the business, the invoice will be paid, but the funds will go to his person.
>>> 
>>> I'm trying to describe something, but don't have the precise wording.
>>> 
>>> The main thing is that the invoice stays in the books as unpaid. Then when the invoice is paid, the money goes to the person who paid to ensure timely delivery of the product of services.
>>> 
>>> The problem is, if the invoice was marked paid the company wouldn't have any outstanding invoice to pay.  The benefactor doesn't mind being written in the books, but not as directly paying the invoice, but of course having a record of where the money actually went so that the particular funds in that item/instance will be returned specifically when that particular item's invoice is paid... and no other item or invoice.
>> Perhaps I haven’t got enough caffeine on board yet, but I can’t work out which party’s accounts you are keeping!
>> 
>> I manage only my personal accounts, so have no experience with invoicing.
>> 
>> That said, et’s say you are looking after the Supplier’s books.
>> 
>> 1. The Purchaser orders an item from the Supplier.
>> 2. The Supplier wants immediate settlement, and issues an Invoice, which is paid by a Third Party (it could be anyone, but it seems you are looking at an employee or the proprietor of the Purchaser).
>> 3. The Supplier receives payment, provides the goods, and closes the Invoice in his accounts.
>> 
>> As far you are concerned (as the Supplier’s bookkeeper), the job is done - no need to keep the invoice open.
>> 
>> If, on the other hand, you are looking after the Purchaser’s books, you will receive an Invoice from the Supplier, but this has already been paid by the Third Party.
>> 
>> 1. Your record the purchase from the Supplier, but the source of the money is not one of the Purchaser’s bank or credit card accounts, it comes through a new Liability account - “Loan from Third Party”.
>> 2. In due course, the Purchaser must repay the Loan from the Third Party, which could be by cheque or Petty Cash, and will be recorded as such.
>> 
>> In this situation, you won’t have created an invoice, so there is no invoice to leave open.
>> 
>> Or have I misunderstood?
>> 
>> Michael
> 
> Thanks for the input, Michael.
> 
> By the way, my company is the supplier.  It seems like you're saying, there isn't any mechanism in Gnucash or Accounting to associate funds to an invoice of the amount of the invoice without actually closing the invoice.  So I'll resolve, for not, to do what I have been doing.  Make a note off the books to repay the benefactor off the books when the invoice is paid.

Ah - there are three stages to the process:

1. The “benefactor” pays you for the goods immediately on receiving them.
2. An invoice is submitted to his company, and company settles its account in the usual way.
3. As your company has now been paid twice for the same goods, your company reimburses the benefactor.

I think I would still regard the benefactor’s payment as a loan, deal with the invoice in the normal way, and reimburse the benefactor once the invoice has been closed following receipt of the company’s cheque.

Michael

> 
> I'll keep reading the other business discussions and if one day I see something similar enough, I'll bring this scenario with a better description.
> 
> By the way, the benefactor is also a client and has his own separate account.  One of the problems was entering money into the system from this client (the benefactor) without having his outstanding invoices paid... outstanding, in the sense of recurring subscriptions.
> 
> -- L. James
> 
> -- 
> L. D. James
> ljames at apollo3.com <mailto:ljames at apollo3.com>
> www.apollo3.com/~ljames <http://www.apollo3.com/~ljames>